By Steve Capanna, Policy Director, Crux Alliance
Since the bombing of Iran began, shipping traffic through the Strait of Hormuz has collapsed to less than 10 percent of its pre-war levels. Even if the current round of negotiations between the U.S. and Iran proves more productive than the previous ones, shipping experts say traffic won’t normalize for weeks, or even months, while the physical damage to export infrastructure will also have long-term effects on markets.
The Hormuz closure has severely affected oil and gas supplies, with impacts immediately felt by people around the world, from higher prices to outright shortages. But the closure is also impacting global fertilizer markets in ways that won’t be fully felt for months. Natural gas is used to produce ammonia, which in turn is used to produce synthetic nitrogen fertilizers, and the Strait of Hormuz is a significant global chokepoint for all of these products. Up to 30 percent of global fertilizer trade went through the Strait in 2024, according to the International Food Policy Research Institute, as well as nearly a quarter of global ammonia exports and about 20 percent of global liquefied natural gas supply. Unsurprisingly, global fertilizer prices have risen sharply this year, including the second-largest one-month spike in the last decade. Prices of urea, the most widely used synthetic nitrogen fertilizer, increased 80 percent from February to May.
The fact that this spike occurred during spring planting season makes the situation particularly serious. Many farmers buy fertilizer in advance, but some—especially those without a lot of extra cash on hand—wait until right before they need it. Unlike oil, fertilizer has no strategic public stockpiles. Much of it is bought and shipped just in time, for a narrow window each year. Farmers who didn’t buy in advance faced the choice of paying sky-high prices or not planting, which is why food prices this fall could be significantly higher than what we’re seeing today.
Some countries are far more exposed than others. Brazil imports around 85 percent of its fertilizer. And India was the single largest urea importer in the world last year, with nearly three-quarters of that sourced from Gulf producers, now cut off by the Hormuz closure.
For the world’s poorest countries, the situation is especially dire. Sub-Saharan Africa imports 90 percent of its fertilizer at prices reportedly up to four times higher than in Europe. That makes this region particularly vulnerable to price shocks. For example, as of April, Burkina Faso and Senegal were facing supply gaps that could exceed 30 percent of their national requirements during planting season.
The dependence on fossil fuel-based fertilizers not only increases the risk of food price spikes, but also contributes significantly to climate change.
Agriculture is responsible for about 70 percent of human-caused emissions of nitrous oxide (N2O), a GHG that is nearly 300 times more potent than CO₂. Agriculture’s role in climate change is largely due to the use of synthetic fertilizer, which alone represents about 2 percent of global GHG emissions, roughly equal to the global aviation sector.
This is the third major fertilizer shock in six years. COVID-19 wreaked havoc on global supply chains. Russia’s invasion of Ukraine sent urea prices surging in 2022. Now this. As long as we rely on fossil fuels for fertilizer production, we should expect supply shocks and disruptive price spikes—and a hotter planet. But there are steps we can take to begin addressing these challenges.
Producing green fertilizer at industrial scale. Green fertilizer is produced from ammonia made with green hydrogen, which is itself produced from clean electricity and water rather than natural gas, cutting the fossil fuel dependency at its source. There are promising signs around the development of green fertilizer, but the gap between ambition and reality remains large.
Agora Industry’s Global Green Fertiliser Tracker, which monitors every renewable ammonia project worldwide, finds that less than 0.1 percent of global ammonia production used for nitrogen fertilizer is renewable. The good news is that large-scale projects are now moving: India is commissioning a 1 million tonne per year green ammonia plant to enter production in late 2026, with a 500,000 tonne per year offtake deal already signed. South Africa is targeting 1 million tonnes per year by 2029. Egypt is targeting 1.65 million tonnes per year by the same date. These pilot facilities are important to demonstrate technological viability and reduce the costs of producing green fertilizer at scale.
An Agora study on decentralized renewable fertilizer production finds that cost parity with fossil fertilizer could be reached as soon as 2035 in countries with cheap renewable electricity and large-scale agriculture, like Thailand, Brazil, and parts of the U.S. But carbon pricing mechanisms, long-term offtake agreements, and up-front support for electrolyzer deployment will be required to get there sooner.
Adopting smarter fertilizer management. The bulk of fertilizer-related emissions—nearly 60 percent—actually come not from its production but from its use in the field. When nitrogen fertilizers are applied to fields, nearly half of the nitrogen is lost to the atmosphere in the form of N2O.
Nitrogen-based fertilizers are often overapplied, which means the emissions and the price tag are both larger than they need to be. This would be true even if we completely switched to green fertilizer. But there are strategies that can help minimize these emissions. Optimized nitrogen management, if widely adopted, could cut N₂O from row-crop agriculture by more than 50 percent with no yield penalty.
A growing group of countries is enacting meaningful nitrogen-reduction targets—China’s national Fertilizer Reduction Policy cut N₂O emissions by 13 percent after 2016, while the EU’s Nitrates Directive has delivered a 31 percent reduction in agricultural N₂O emissions since the 1980s—but most major agricultural economies haven’t yet adopted them.
And to be clear, adopting better fertilizer management is easier said than done. Farmers over-apply fertilizer to ensure productive yields. They would much rather waste a little fertilizer than have under-productive crops. This may point to the need for government guarantees, technical assistance, and incentives for more targeted fertilizer application.
Recovering more of the nitrogen we already have. Manure is not a perfect substitute for synthetic fertilizer because it’s much less nutrient-dense, but it can be added to soil to allow for reduced synthetic fertilizer use. More than 90 percent of the manure produced in the EU is reapplied to fields as organic fertilizer, but the rate is much lower in other regions. In China, for instance, the rate is lower than 40 percent, implying that more than half of the related nutrients are lost. Industrial processing of manure can convert it into a fertilizer that provides more nutrient contribution than raw manure, allowing it to substitute directly for urea. The EU’s recently adopted RENURE framework will allow recovered manure nitrogen to replace synthetic fertilizer, cutting GHG emissions by 6 percent in livestock-dense regions. More research is needed on N₂O trade-offs at the application stage, but the recoverable resource is large.
Shifting toward agroecology and away from nitrogen fertilizers. Many advocates argue that fertilizer demand can be reduced through a combination of agroecology practices that fix more nitrogen to the soil, improving soil health, and reducing moisture and nutrient loss. A key consideration here is to ensure the productivity of cropland remains high, so that more land isn’t needed to grow the same amount of food, leading to more GHGs from indirect land-use change.
None of these measures will help the farmers in West Africa who are facing fertilizer shortages today or those who will suffer because of higher food prices in the fall. That requires emergency supply coordination, not long-term policy. But long-term policy will ultimately be required to reduce our dependence on synthetic fertilizer, lessen the environmental impact of fertilizer production and use, and develop a food supply chain that can weather the inevitable next shock to fossil fuels and synthetic fertilizer supply chains.